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IN SUPREME COURT OF INDIA Page 1 of 12

CASE NO.:
Appeal (civil) 1976 of 1998

PETITIONER:
Binny Ltd. & Anr.

RESPONDENT:
V. Sadasivan & Ors.

DATE OF JUDGMENT: 08/08/2005

BENCH:
K.G. Balakrishnan & P. Venkatarama Reddi

JUDGMENT:
J U D G M E N T
WITH

CIVIL APPEAL NO. 4839 OF 2005

(Arising out of SLP (C ) No. 6016 of 2002)

Mr. D.S. Veer Ranji \005\005\005Appellan

t

Versus

CIBA Specialty Chemicals (I) Ltd. & Ors. \005..\005.Respondents

K.G. BALAKRISHNAN, J.

Leave granted in SLP(C ) No. 6016/2002 and the appeal is heard

along with Civil Appeal No. 1976/1998. In these two appeals, common
questions of law arise for consideration.

In Civil Appeal No. 1976/1998, narration of brief facts is necessary to

understand whether the reliefs as prayed for by respondents 2 to 36 could
have been granted by the High Court. Each of the respondents was working
as member of the management staff of the appellant company, which was
engaged in the manufacture of cloth. The respondents were originally
appointed in the appellant-company in various jobs such as Clerks, Machine
Overlookers, Supervisors, etc. According to these respondents, from 1981
onwards, the appellant company started insisting on them to be designated
as management staff with the object of avoiding payment of overtime wages.
The respondents signed an agreement with the Management acceding to the
request of the appellant company, but they continued to perform the same
duties as before. The appellant company contended that there was incessant
rain in the night of 12.6.1996 when the entire company premises was
flooded with water and it caused serious damage to the plant and machinery
and finished-stock and the appellant company stayed all the operations and
informed the Commissioner of Labour that water had entered the mill
premises causing serious damage to the plant and machinery and
management had no other alternative but to suspend the operations of the
mill. Order of termination was issued to the respondents invoking Clause 8
of the agreement dated 12.3.1991 entered into by the respondents with the
appellant company. As per clause 8 of the agreement, the Management had
a right to terminate the services without assigning any reason by just giving
one month’s notice or salary in lieu thereof. Appellant contended that all
these respondents were drawing salary of more than Rs. 1,600/- per month
and they were not ’workmen’ under the Industrial Disputes Act, 1947. The
respondents filed Writ petition No. 11862/1996 for a Declaration that Clause
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8 of the Agreement read with Order of termination dated 31.7.1996 issued
by the appellant company was void and illegal and violative of Section 23 of
the Indian Contracts Act. The respondents had also contended that the
agreement entered into by the respondents with the appellant company was
violative of Article 21 of the Constitution and the closure of the mill was
against Section 25F and 25N of the Industrial Disputes Act, 1947, and they
sought for a direction to reinstate them in service with continuity of service
and all consequential benefits. The appellant-company contended that the
Writ Petition was not maintainable as the appellant company was a private
body; therefore, the question of granting the declaration sought would not
arise. It was also contended that there was alternative efficacious remedy
available to them and therefore, the discretionary jurisdiction under Article
226 of the Constitution of India should not be exercised. The appellant
company also contended that the respondents were not entitled to seek a
Writ of Mandamus as the appellant was a private company and the decision
of the appellant company to terminate the services of the respondents is not
liable to be the subject matter of judicial review. According to the appellant
company, they were neither ’public authorities’ nor their action involved
public law element, for which remedy of Writ of Mandamus was available.
The Writ Petition was considered by the Division Bench of the Madras High
Court. The Court held that Clause 8 of the agreement entered into between
the respondents 2 to 36 and the appellant was void and unenforceable
against the respondents as being violative of Section 23 of the Indian
Contracts Act. Reliance was placed on Central Inland Water Transport
Corporation Ltd. Vs. Brojo Nath Ganguly (1986) 3 SCC 156 and the
High Court ultimately held that in the proceedings under Article 226, the
respondents herein would not be entitled to get the relief of reinstatement
and back wages and the court granted only a declaratory relief to the effect
that the termination order was illegal and the respondents had to work out
an appropriate remedy before the appropriate forum.

In the appeal arising out of SLP (Civil) No. 6106/2000, the appellant
was employed as a Corporate Legal Manager with the 1st respondent
company, which is a private limited company engaged in the manufacture of
chemicals. The services of the appellant were terminated with effect from
1.6.1998. The appellant sought for the issue of a Writ or other appropriate
Order to quash or set aside the Termination Order dated 1.6.1998. He also
sought for a Writ of Mandamus directing the respondents to allow the
appellant to report for work in the same grade and pay-scale to which he was
originally employed. The respondent company contended that the Writ
Petition was not maintainable as the respondent company was a private
employer and the appellant was working under a private contract of
employment. The Writ Petition filed by the appellant was referred to a larger
Bench in view of the important question of law raised by the parties and the
Full Bench of the Bombay High Court elaborately considered the question and
held that the appellant was not entitled to the remedy sought for and the
Writ Petition was not maintainable. The Full Bench held that by terminating
the services of the appellant, the Company was not discharging any public
function and, therefore, the action sought to be challenged by the appellant
was not amenable to the jurisdiction of judicial review.

We heard the learned Counsel on either side. Reference was made to

various decisions on the subject.

The contention of the appellant in Civil Appeal No. 1976/1998 was that
the decision of the High Court invoking the extraordinary jurisdiction under
Article 226 of the Constitution was incorrect and that the Court should not
have interfered with the decision of a private limited company and that the
powers under Article 226 cannot be invoked against a private authority who
is discharging its functions on the basis of the contract entered into between
the employer and the employees. It was contended that the remedy
available to the workers was only ordinary civil litigation. It was also
contended that there was no public law element in the action taken by the
appellant against the employees and, therefore, the public law remedy of
judicial review had no application.
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Employees who are respondents in that appeal contended that their

contract with the appellant was per se illegal and void as it was opposed to
Section 23 of the Indian Contracts Act. It was argued that under similar
circumstances, this court had given direction to redress the grievances of the
employees. Reference was made to Central Inland Water Transport
Corporation Ltd. Vs. Brajo Nath Ganguly (1986) 3 SCC 156 and it was
contended by the respondent employees that the decision to terminate their
services was based on a specific clause in the contract which by itself is void
in view of Section 23 of the Indian Contracts Act. Therefore, the High Court
was justified in giving a declaratory relief in their favour.

In Civil Appeal arising out of SLP(Civil) No. 6016 of 2002, the appellant
contended that the action of the respondent was illegal and void and his
services should not have been terminated by the employer. According to the
appellant, even if the decision-making authority is a private body or not an
’authority’ coming within the purview of Article 12 of the Constitution, on
wider issues, the jurisdiction of the High Court under Article 226 can be
invoked to set aside the illegal act and to protect the fundamental rights of
the aggrieved party. The learned Counsel for the respondent representing
the company submitted that the appellant had been rightly discharged from
the services and the company being a private authority was not amenable to
the writ jurisdiction of the High Court. It was submitted that under the
powers of judicial review by the High Court, a public action alone could have
been challenged and the decision to terminate the service of an employee on
the ground that his services were unsatisfactory does not have any public law
element and, therefore, the High Court has rightly rejected the contentions
advanced by the appellant therein.

We have carefully considered the various contentions urged by the

parties on either side. In order to decide the question, it is necessary to
trace the history of law relating to judicial review of public actions.

Superior Court’s supervisory jurisdiction of judicial review is invoked

by an aggrieved party in myriad cases. High Courts in India are empowered
under Article 226 of the Constitution to exercise judicial review to correct
administrative decisions and under this jurisdiction High Court can issue to
any person or authority, any direction or order or writs for enforcement of
any of the rights conferred by Part III or for any other purpose. The
jurisdiction conferred on the High Court under Article 226 is very wide.
However, it is an accepted principle that this is a public law remedy and it is
available against a body or person performing public law function. Before
considering the scope and ambit of public law remedy in the light of certain
English decisions, it is worthwhile to remember the words of Subha Rao J.
expressed in relation to the powers conferred on the High Court under Article
226 of the Constitution in Dwarkanath Vs. Income Tax Officer 1965(3)
SCR 536 at pages 540-41:
"This article is couched in comprehensive phraseology and it ex
facie confers a wide power on the High Courts to reach injustice
wherever it is found. The Constitution designedly used a wide
language in describing the nature of the power, the purpose for
which and the person or authority against whom it can be
exercised. It can issue writs in the nature of prerogative writs as
understood in England; but the scope of those writs also is
widened by the use of the expression "nature", for the said
expression does not equate the writs that can be issued in India
with those in England, but only draws an analogy from them.
That apart, High Courts can also issue directions, orders or writs
other than the prerogative writs. It enables the High Court to
mould the reliefs to meet the peculiar and complicated
requirements of this country. Any attempt to equate the scope
of the power of the High Court under Article 226 of the
Constitution of India with that of the English Courts to issue
prerogative writs is to introduce the unnecessary procedural
restrictions grown over the years in a comparatively small
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country like England with a unitary form of Government into a
vast country like India functioning under a federal structure.
Such a construction defeats the purpose of the article itself\005."

The Writ of Mandamus lies to secure the performance of a public or a

statutory duty. The prerogative remedy of mandamus has long provided the
normal means of enforcing the performance of public duties by public
authorities. Originally, the writ of mandamus was merely an administrative
order from the sovereign to subordinates. In England, in early times, it was
made generally available through the Court of King’s Bench, when the
Central Government had little administrative machinery of its own. Early
decisions show that there was free use of the writ for the enforcement of
public duties of all kinds, for instance against inferior tribunals which refused
to exercise their jurisdiction or against municipal corporation which did not
duly hold elections, meetings, and so forth. In modern times, the
mandamus is used to enforce statutory duties of public authorities. The
courts always retained the discretion to withhold the remedy where it would
not be in the interest of justice to grant it. It is also to be noticed that the
statutory duty imposed on the public authorities may not be of discretionary
character. A distinction had always been drawn between the public duties
enforceable by mandamus that are statutory and duties arising merely from
contract. Contractual duties are enforceable as matters of private law by
ordinary contractual remedies such as damages, injunction, specific
performance and declaration. In the Administrative Law (Ninth Edition)
by Sir William Wade and Christopher Forsyth, (Oxford University Press)
at page 621, the following opinion is expressed:

"A distinction which needs to be clarified is that between public

duties enforceable by mandamus, which are usually statutory,
and duties arising merely from contract. Contractual duties are
enforceable as matters of private law by the ordinary
contractual remedies, such as damages, injunction, specific
performance and declaration. They are not enforceable by
mandamus, which in the first place is confined to public duties
and secondly is not granted where there are other adequate
remedies. This difference is brought out by the relief granted in
cases of ultra vires. If for example a minister or a licensing
authority acts contrary to the principles of natural justice,
certiorari and mandamus are standard remedies. But if a trade
union disciplinary committee acts in the same way, these
remedies are inapplicable: the rights of its members depend
upon their contract of membership, and are to be protected by
declaration and injunction, which accordingly are the remedies
employed in such cases."

Judicial review is designed to prevent the cases of abuse of power and

neglect of duty by public authorities. However, under our Constitution,
Article 226 is couched in such a way that a writ of mandamus could be issued
even against a private authority. However, such private authority must be
discharging a public function and that the decision sought to be corrected or
enforced must be in discharge of a public function. The role of the State
expanded enormously and attempts have been made to create various
agencies to perform the governmental functions. Several corporations and
companies have also been formed by the government to run industries and
to carry on trading activities. These have come to be known as Public Sector
Undertakings. However, in the interpretation given to Article 12 of the
Constitution, this Court took the view that many of these companies and
corporations could come within the sweep of Article 12 of the Constitution.
At the same time, there are private bodies also which may be discharging
public functions. It is difficult to draw a line between the public functions and
private functions when it is being discharged by a purely private authority. A
body is performing a "public function" when it seeks to achieve some
collective benefit for the public or a section of the public and is accepted by
the public or that section of the public as having authority to do so. Bodies
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therefore exercise public functions when they intervene or participate in
social or economic affairs in the public interest. In a book on Judicial
Review of Administrative Action (Fifth Edn.) by de Smith, Woolf &
Jowell in Chapter 3 para 0.24, it is stated thus:

"A body is performing a "public function" when it seeks to

achieve some collective benefit for the public or a section of the
public and is accepted by the public or that section of the public
as having authority to do so. Bodies therefore exercise public
functions when they intervene or participate in social or
economic affairs in the public interest. This may happen in a
wide variety of ways. For instance, a body is performing a public
function when it provides "public goods" or other collective
services, such as health care, education and personal social
services, from funds raised by taxation. A body may perform
public functions in the form of adjudicatory services (such as
those of the criminal and civil courts and tribunal system). They
also do so if they regulate commercial and professional activities
to ensure compliance with proper standards. For all these
purposes, a range of legal and administrative techniques may be
deployed, including: rule-making, adjudication (and other forms
of dispute resolution); inspection; and licensing.

Public functions need not be the exclusive domain of the

state. Charities, self-regulatory organizations and other
nominally private institutions (such as universities, the Stock
Exchange, Lloyd’s of London, churches) may in reality also
perform some types of public function. As Sir John Donaldson
M.R. urged, it is important for the courts to "recognise the
realities of executive power" and not allow "their vision to be
clouded by the subtlety and sometimes complexity of the way in
which it can be exerted". Non-governmental bodies such as
these are just as capable of abusing their powers as is
government."

In Regina Vs. Panel on Take-overs and Merges, Ex parte Datafin

Plc. And another (1987) 1 Queen’s Bench Division 815, a question arose
whether the Panel of Take-overs and Mergers had acted in concert with other
parties in breach of the City Code on Take-overs and Mergers. The panel
dismissed the complaint of the applicants. Though the Panel on Take-over
and Mergers was purely a private body, the Court of Appeal held that the
supervisory jurisdiction of the High Court was adaptable and could be
extended to any body which performed or operated as an integral part of a
system which performed public law duties, which was supported by public
law sanctions and which was under an obligation to act judicially, but whose
source of power was not simply the consent of those over whom it exercised
that power; that although the panel purported to be part of a system of self-
regulation and to derive its powers solely from the consent of those whom its
decisions affected, it was in fact operating as an integral part of a
governmental framework for the regulation of financial activity in the City of
London, was supported by a periphery of statutory powers and penalties, and
was under a duty in exercising what amounted to public powers to act
judicially; that, therefore, the court had jurisdiction to review the panel’s
decision to dismiss the applicants’ complaint; but that since, on the facts,
there were no grounds for interfering with the panel’s decision, the court
would decline to intervene.

Lloyd L.J., agreeing with the opinion expressed by Sir John

Donaldson M.R. held :

"I do not agree that the source of the power is the sole test
whether a body is subject to judicial review, nor do I so read
Lord Diplock’s speech. Of course the source of the power will
often, perhaps usually, be decisive. If the source of power is a
statute, or subordinate legislation under a statute, then clearly
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the body in question will be subject to judicial review. If at the
end of the scale, the source of power is contractual, as in the
case of private arbitration, then clearly the arbitrator is not
subject to judicial review.

In that decision, they approved the observations made by Lord

Diplock in Council of Civil Service Unions vs. Minister for the Civil
Service (1985) A.C. 374, 409 wherein it was held :

"\005.for a decision to be susceptible to judicial review the decision-

maker must be empowered by public law (and not merely, as in
arbitration, by agreement between private parties) to make
decisions that, if validly made, will lead to administrative action or
abstention from action by an authority endowed by law with
executive powers which have one or other of the consequences
mentioned in the preceding paragraph. The ultimate source of
the decision-making power is nearly always nowadays a statute or
subordinate legislation made under the statute; but in the
absence of any statute regulating the subject matter of the
decision the source of the decision-making power may still be the
common law itself, i.e., that part of the common law that is given
by lawyers the label of ’the prerogative.’ Where this is the source
of decision-making power, the power is confined to executive
officers of central as distinct from local government and in
constitutional practice is generally exercised by those holding
ministerial rank"

It is also pertinent to refer to Sir John Donaldson M.R. in that

Take-Over Panel case :

"In all the reports it is possible to find enumerations of factors

giving rise to the jurisdiction, essential or as being exclusive of
other factors. Possibly the only essential elements are what
can be described as a public element, which can take many
different forms, and the exclusion from the jurisdiction of bodies
whose sole source of power is a consensual submission to is
jurisdiction."

The above guidelines and principles applied by English courts cannot

be fully applied to Indian conditions when exercising jurisdiction under Article
226 or 32 of the Constitution. As already stated, the power of the High
Courts under Article 226 is very wide and these powers have to be exercised
by applying the constitutional provisions and judicial guidelines and violation,
if any, of the fundamental rights guaranteed in Part III of the Constitution.
In the matter of employment of workers by private bodies on the basis of
contracts entered into between them, the courts had been reluctant to
exercise the powers of judicial review and whenever the powers were
exercised as against private employers, it was solely done based on public
law element involved therein.

This view was expressly stated by this Court in various decisions and
one of the earliest decisions is The Praga Tools Corporation vs. Shri C.A.
Imanual and Others (1969) 1 SCC 585 In this case, the appellant
company was a company incorporated under the Indian Companies Act and
at the material time the Union Government and the Government of Andhra
Pradesh held 56 per cent and 32 per cent of its shares respectively.
Respondent workmen filed a writ petition under Article 226 in the High Court
of Andhra Pradesh challenging the validity of an agreement entered into
between the employees and the company, seeking a writ of mandamus or
an order or direction restraining the appellant from implementing the said
agreement. The appellant raised objection as to the maintainability of the
writ petition. The learned Single Judge dismissed the petition. The
Division Bench held that the petition was not maintainable against the
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company. However, it granted a declaration in favour of three workmen,
the validity of which was challenged before this Court. This Court held at
pages 589-590 as under:

"\005.that the applicant for a mandamus should have a legal and

specific right to enforce the performance of those dues.
Therefore, the condition precedent for the issue of mandamus is
that there is in one claiming it a legal right to the performance
of a legal duty by one against whom it is sought. An order of
mandamus is, in form, a command directed to a person,
corporation or any inferior tribunal requiring him or them to do s
particular thing therein specified which appertains to his or their
office and is in the nature of a public duty. It is, however, not
necessary that the person or the authority on whom the
statutory duty is imposed need be a public official or an official
body. A mandamus can issue, for instance, to an official of a
society to compel him to carry out the terms of the statute
under or by which the society is constituted or governed and
also to companies or corporations to carry out duties placed on
them by the statutes authorizing their undertakings. A
mandamus would also lie against a company constituted by a
statute for the purpose of fulfilling public responsibilities [Cf.
Halsbury’s Laws of England (3rd Ed.), Vol.II p 52 and onwards].

The company being a non-statutory body and one incorporated

under the Companies Act there was neither a statutory nor a
public duty imposed on it by a statute in respect of which
enforcement could be sought by means of a mandamus, nor
was there in its workmen any corresponding legal right for
enforcement of any such statutory or public duty. The High
Court, therefore, was right in holding that no writ petition for a
mandamus or an order in the nature of mandamus could lie
against the company."

It was also observed that when the High Court had held that the writ
petition was not maintainable, no relief of a declaration as to invalidity of an
impugned agreement between the company and its employees could be
granted and that the High Court committed an error in granting such a
declaration.

In VST Industries Limited vs. VST Industries Workers’ Union &

Anr. (2001) 1 SCC 298, the very same question came up for consideration.
The appellant-company was engaged in the manufacture and sale of
cigarettes. A petition was filed by the first respondent under Article 226 of
the Constitution seeking a writ of mandamus to treat the members of the
respondent Union, who were employees working in the canteen of the
appellant’s factory, as employees of the appellant and for grant of
monetary and other consequential benefits. Speaking for the Bench,
Rajendra Babu, J., (as he then was), held as follows :

"7. In de Smith, Woolf and Jowell’s Judicial Review of

Administrative Action, 5th Edn., it is noticed that not all the
activities of the private bodies are subject to private law, e.g.,
the activities by private bodies may be governed by the
standards of public when its decisions are subject to duties
conferred by statute or when by virtue of the function it is
performing or possible its dominant position in the market, it is
under an implied duty to act in the public interest. By way of
illustration, it is noticed that a private company selected to run
a prison although motivated by commercial profit should be
regarded, at least in relation to some of its activities, as subject
to public law because of the nature of the function it is
performing. This is because the prisoners, for whose custody
and care it is responsible, are in the prison in consequence of an
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order of the court, and the purpose and nature of their
detention is a matter of public concern and interest. After
detailed discussion, the learned authors have summarized the
position with the following propositions :

(1) The test of a whether a body is performing a public

function, and is hence amenable to judicial review,
may not depend upon the source of its power or
whether the body is ostensibly a "public" or a
"private" body.

(2) The principles of judicial review prima facie govern the

activities of bodies performing public functions.

(3) However, not all decisions taken by bodies in the

course of their public functions are the subject matter
of judicial review. In the following two situations
judicial review will not normally be appropriate even
though the body may be performing a public function

(a) Where some other branch of the law more

appropriately governs the dispute between the parties.
In such a case, that branch of the law and its
remedies should and normally will be applied; and

(b) Where there is a contract between the litigants.

In such a case the express or implied terms of the
agreement should normally govern the matter. This
reflects the normal approach of English law, namely,
that the terms of a contract will normally govern the
transaction, or other relationship between the parties,
rather than the general law. Thus, where a special
method of resolving disputes (such as arbitration or
resolution by private or domestic tribunals) has been
agreed upon by the parties (expressly or by necessary
implication), that regime, and not judicial review, will
normally govern the dispute.

Applying the above principles, this Court held that the High Court
rightly held that it had no jurisdiction.

Another decision on the same subject is General Manager, Kisan

Sahkar Chini Mills Limited, Sultanpur, UP vs. Satrughan Nishad and
Ors. (2003) 8 SCC 639. The appellant was a cooperative society and was
engaged in the manufacture of sugar. The respondents were the workers of
the appellant and they filed various writ petitions contending that they had
to be treated as permanent workmen. The appellant challenged the
maintainability of those writ petitions and applying the principles enunciated
in VST Industries’ case (supra), it was held by this Court that the High
Court had no jurisdiction to entertain an application under Article 226 of the
Constitution as the mill was engaged in the manufacture and sale of sugar
which would not involve any public function.

In Federal Bank Limited vs. Sagar Thomas & Ors. (2003) 10

SCC 733, the respondent was working as a Branch Manager of the appellant
Bank. He was suspended and there was a disciplinary enquiry wherein he
was found guilty and dismissed from service. The respondent challenged his
dismissal by filing a writ petition. The learned Single Judge held that the
Federal Bank was performing a public duty and as such it fell within the
definition of "other authorities" under Article 12 of the Constitution. The
appellant bank preferred an appeal, but the same was dismissed and the
decision of the Division Bench was challenged before this Court. This Court
observed that a private company carrying on business as a scheduled bank
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cannot be termed as carrying on statutory or public duty and it was therefore
held that any business or commercial activity, whether it may be banking,
manufacturing units or related to any other kind of business generating
resources, employment, production and resulting in circulation of money
which do have an impact on the economy of the country in general, cannot
be classified as one falling in the category of those discharging duties or
functions of a public nature. It was held that that the jurisdiction of the
High Court under Article 226 could not have been invoked in that case.

The counsel for the respondent in Civil Appeal No. 1976 of 1998 and
for the appellant in the civil appeal arising out of SLP(Civil) No. 6016 of 2002
strongly contended that irrespective of the nature of the body, the writ
petition under Article 226 is maintainable provided such body is discharging
a public function or statutory function and that the decision itself has the
flavour of public law element and they relied on the decision of this Court in
Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti
Mahotsav Smarak Trust & Ors. Vs. V.R. Rudani & Ors (1989) 2 SCC
691. In this case, the appellant was a Trust running a science college
affiliated to the Gujarat University under Gujarat University Act, 1949. The
teachers working in that college were paid in the pay scales recommended by
the University Grants Commission and the college was an aided institution.
There was some dispute between the University Teachers Association and
the University regarding the fixation of their pay scales. Ultimately, the
Chancellor passed an award and this award was accepted by the State Govt.
as well as the University and the University directed to pay the teachers as
per the award. The appellants refused to implement the award and the
respondents filed a writ petition seeking a writ of mandamus and in the writ
petition the appellants contended that the college managed by the Trust was
not an "authority" coming within the purview of Article 12 of the Constitution
and therefore the writ petition was not maintainable. This plea was
rejected and this Court held that the writ of mandamus would lie against a
private individual and the words "any person or authority" used in Article 226
are not to be confined only to statutory authorities and instrumentalities of
the State and they may cover any other person or body performing public
duty. The form of the body concerned is not very much relevant. What is
relevant is the nature of the duty imposed on the body. The duty must be
judged in the light of positive obligation owed by the person or authority to
the affected party. No matter by what means the duty is imposed, if a
positive obligation exists, mandamus cannot be denied.

The above decision cannot be applied to the facts of this case. It is

important to note that the college was an aided institution and imparting
education to students. These facts are specifically stated in paragraph 15
of the judgment. It was in this background that this Court held that there
was a public law element in the matter involved therein and that the college
authorities were bound to pay salary and allowances to the teachers. The
said case did not emanate from a contract of employment between the
workers and the private body. For that reason, the Rudani’s case cannot
be applied to the facts of the present case.

Two other decisions relied upon by the appellant to argue that the
writ petition was maintainable are the decisions reported in (1986)3 SCC
156 Central Inland Water Transport Corporation Ltd. & Anr. Vs. Brojo
Nath Ganguly & Anr. (supra) and in 1991 Supp(1) SCC 600 Delhi
Transport Corporation vs. DTC Mazdoor Congress & Ors. The Central
Inland case was extensively relied on. In this case, the appellant
corporation was a Govt. company incorporated under the Companies Act and
the majority of the shares were held by the Union of India and remaining
shares were held by the State of West Bengal. Each of the respondents in
the two appeals was in the service of the said company. A notice under Rule
9(1) was served on them and their services were terminated with immediate
effect by paying three months pay. They filed writ petitions before the High
Court and the Division Bench allowed the same. The appellant corporation
filed an appeal before this Court. The main thrust of the argument of the
respondents was that Rule 9(1) of Central Inland Water Transport
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Corporation Limited (Service, Discipline and Appeal) Rules, 1979 was void
and illegal and violative of Article 14 of the Constitution and it was also void
in view Section 23 of the Contract Act. This Court held that Rule 9(1) was
violative of Article 14 as it was against the public policy as the employer had
absolute power to terminate the service of an employee giving three months
notice. This Court held that this was an absolute arbitrary power given to
the corporation and termination of the respondent employees by invoking
Rule 9(1) was illegal.

It is important to understand the real dicta laid down in the

background of the facts involved therein. The appellant was a public sector
undertaking and in that view of the matter it was held that the contract of
employment and the service rules which gave absolute and arbitrary power
to terminate the service of the employees were illegal. It may be also
noticed that the termination clause was referred to in the context of the
contract read as a whole and no enquiry was contemplated under the rules
even in the case of allegation of misconduct and it was held to be violative
of the principles of natural justice. It was also held to be violative of Section
23 of the Contract Act as it was opposed to public policy to terminate the
services of the employee without conducting an enquiry even on the ground
of misconduct. The public policy principles can be applied to the
employment in public sector undertaking in appropriate cases. But the same
principles cannot be applied to private bodies. There are various labour laws
which curtail the power of the employer from doing any anti-labour activity.
Sufficient safeguards are made in the labour law enactments to protect the
interests of the employees of private sector. The service rules and
regulations which are applicable to govt. employees or employees of public
sector undertakings stand on a different footing and they cannot be tested on
the same touchstone or enforced in the same manner. Therefore, the
decision rendered by this Court in Central Inland case is of no assistance to
the respondents in Civil Appeal No. 1976 of 1988 or to the appellants in the
civil appeal arising out of SLP(Civil) No. 6016 of 2002.

In the second case also , namely, the Delhi Transport Corporation

Vs. DTC Mazdoor Congress & Ors. 1991 Supp.(1) SCC 600, the appellant
was a public sector undertaking and the main controversy was about the
term "other authorities" under Article 12 of the Constitution. Both in
Central Inland and DTC cases, the decision of the public sector undertaking
was under challenge and the question raised was whether the principles of
natural justice and fairness are to be applied. It was held that this Court has
got jurisdiction to consider this question by invoking the principles of judicial
review. But it would be noticed that in both the cases, it was a public
sector undertaking coming within the purview of "other authorities" under
Article 12 of the Constitution.

In this context, it must be noted that the High Court purported to

apply the ratio in the above two decisions on the assumption that all
termination simplicitor clauses providing for termination on giving notice will
be per se invalid. But the High Court has not examined clauses (8) & (9) of
the Agreement between Management and the Staff of Binny Limited in their
entirety. Clause (9) contemplates an inquiry in a case of termination for
misconduct. Thus there is a provision for natural justice in case of
termination involving misconduct and stigma. In such a case, whether the
ratio of the decisions in DTC and Central Inland cases would apply or not,
was not examined by the High Court. This is an additional reason why the
declaration by the High Court should not be allowed to stand.

Thus, it can be seen that a writ of mandamus or the remedy under

Article 226 is pre-eminently a public law remedy and is not generally
available as a remedy against private wrongs. It is used for enforcement of
various rights of the public or to compel the public/statutory authorities to
discharge their duties and to act within their bounds. It may be used to do
justice when there is wrongful exercise of power or a refusal to perform
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duties. This writ is admirably equipped to serve as a judicial control over
administrative actions. This writ could also be issued against any private
body or person, specially in view of the words used in Article 226 of the
Constitution. However, the scope of mandamus is limited to enforcement of
public duty. The scope of mandamus is determined by the nature of the
duty to be enforced, rather than the identity of the authority against whom
it is sought. If the private body is discharging a public function and the
denial of any right is in connection with the public duty imposed on such
body, the public law remedy can be enforced. The duty cast on the public
body may be either statutory or otherwise and the source of such power is
immaterial, but, nevertheless, there must be the public law element in such
action. Sometimes, it is difficult to distinguish between public law and
private law remedies. According to Halsbury’s Laws of England 3rd ed.
Vol. 30, page-682, "a public authority is a body not necessarily a county
council, municipal corporation or other local authority which has public
statutory duties to perform and which perform the duties and carries out its
transactions for the benefit of the public and not for private profit." There
cannot be any general definition of public authority or public action. The
facts of each case decide the point.

A contract would not become statutory simply because it is for

construction of a public utility and it has been awarded by a statutory body.
But nevertheless it may be noticed that the Government or Government
authorities at all levels is increasingly employing contractual techniques to
achieve its regulatory aims. It cannot be said that the exercise of those
powers are free from the zone of judicial review and that there would be no
limits to the exercise of such powers, but in normal circumstances, judicial
review principles cannot be used to enforce the contractual obligations.
When that contractual power is being used for public purpose, it is certainly
amenable to judicial review. The power must be used for lawful purposes
and not unreasonably.

The decision of the employer in these two cases to terminate the

services of their employees cannot be said to have any element of public
policy. Their cases were purely governed by the contract of employment
entered into between the employees and the employer. It is not appropriate
to construe those contracts as opposed to the principles of public policy and
thus void and illegal under Section 23 of the Contract Act. In contractual
matters even in respect of public bodies, the principles of judicial review have
got limited application. This was expressly stated by this Court in State of
U.P. vs. Bridge & Roof Co. (1996) 6 SCC 22 and also in Kerala State
Electricity Board vs. Kurien E. Kalathil (2000) 6 SCC 295. In the
latter case, this Court reiterated that the interpretation and implementation
of a clause in a contract cannot be the subject matter of a writ petition.
Whether the contract envisages actual payment or not is a question of
construction of contract. If a term of a contract is violated, ordinarily, the
remedy is not a writ petition under Article 226.

Applying these principles, it can very well be said that a writ of

mandamus can be issued against a private body which is not a State within
the meaning of Article 12 of the Constitution and such body is amenable to
the jurisdiction under Article 226 of the Constitution and the High Court
under Article 226 of the Constitution can exercise judicial review of the action
challenged by a party. But there must be a public law element and it cannot
be exercised to enforce purely private contracts entered into between the
parties.

We are unable to perceive any public law element in the termination

of the employees by the appellant in Civil Appeal No. 1976 of 1998 and the
remedy available to the respondents is to seek redressal of their grievance in
civil law or under the labour law enactments especially in view of the
disputed questions involved as regards the status of employees and other
matters. So also, in the civil appeal arising out of SLP(Civil) No. 6016 of
2002, the writ petition has been rightly dismissed by the High Court. We
see no merit in the contention advanced by the appellant therein. The High
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Court rightly held that there is no public law element and the remedy open to
the appellant is to seek appropriate relief other than judicial review of the
action taken by the respondent company.

In the result, we set aside the declaration ordered by the High Court
and allow Civil Appeal No. 1976 of 1998 to the extent indicated above. Civil
Appeal arising out of SLP (Civil) No. 6016 of 2002 is dismissed leaving open
the right of the appellant to seek redressal of his grievance before other
appropriate forum.